October 18, 2017

Financing Methods To Consider When Getting A New Car

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Picture from Flickr

When you get a new car, quality is key. There are many used cars available for shockingly low amounts. However, consider that these cheap cars will probably cost you more when it comes to repair and insurance. Ideally, you want a well maintained and high-quality car you’ll be able to drive for years to come.

This won’t come for cheap. It might be one of the most expensive purchases you make in your life. But if you pay for the right car, it’ll be a worthwhile investment. Due to the price, you may have a hard time paying for it. Some people save up for a long time to be able to afford the car they want. But no matter what your financial situation is, there are options to make getting a new car easier.

Get A Loan

Many loans are available for those looking to buy a car. In fact, some organizations even offer specified auto loans, designed for buying cars. These can be had in high amounts and be paid off over a long term. You will have to pay extra interest for each month, but you can get your car straight away and pay it off in the long term.

Some people also use a personal loan to fund their car payment. It’s important you pay personal loans on time, as failing to do so could result in repossession of your assets. Personal loans usually cover a large amount of money and can be paid off over time.

These kinds of loans usually need you to have a high credit score. This shows you’re reliable enough to repay the large sum of money. If you don’t have a long credit history, or you have had financial problems in the past, your credit score might be too low. Because of this, many people turn to alternative loans.

An installment loan is another option. Installment loans are usually short-term and cover a small to medium amount of money. People use these as they are much easier to get, not requiring a good credit score. They won’t always cover the entire cost, but you can use them to fund part of it. Installment loans are associated with risks such as higher APRs than other loans. The Consumer Financial Protection Bureau (CFPB) is taking measures towards regulating installment loans.

Personal Contract Plans

A lot of car dealerships offer Personal Contract Plans (PCPs). These are like their own form of car loans. Instead of paying for the car in full, you will pay it off in flexible, monthly payments. It’s an ideal way to get the car of the dreams at an affordable rate.

Monthly payments are usually a lot lower than with regular loans. This is due to the flexibility of options when your monthly payments come to an end. To start a PCP, you pay a deposit and are given a monthly payment plan. The monthly payments usually go towards paying off around a third of the car. Once you’ve completed these payments, you have three options.

One option is to pay a final ‘balloon payment’. This involves paying off the rest of the price of the car to take full ownership. Another option is to trade the car in and start a PCP on another vehicle. The last option is to give the car back to the dealership. This might make all your payments feel like a waste, but it’s a good option if you’re moving away or don’t plan to use a car anymore.

Leasing A Car

Leasing a car is similar to using a PCP but without the option of owning the car at the end. Leasing a car is effectively renting it. You’ll have flexible monthly payments to make at a fixed cost. This option isn’t for you if you want to own a car, but leasing has its benefits.

When you lease a car, the dealership you lease from will cover servicing for you. They want to keep the car in the best shape possible as it will be going back to them at the end of the lease. When your lease ends, you have the option to start a lease on a new car. This way you’ll always be up to date with modern, well-serviced autos. Although, you will have to continue to make payments every month.

Additionally, since the car will be given back at the end of the lease, you don’t have to worry about how much it’ll be worth. Leasing is ideal for high-end luxury cars since these often depreciate in value at a fast rate. You can drive the car you’ve always wanted without having to worry about reselling it.

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